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Iraq's export block poses threat to oil markets

The Middle East crisis threatened to disrupt oil markets when Iraq said on Monday that it would cut production for one month to show solidarity with the Palestinians. Ali Rodriguez, secretary-general of the Organisation of Oil Exporting Countries, warned that Iraq's action, coupled with labour trouble that reduced Venezuelan oil exports, could provoke an oil crisis.

The Middle East crisis threatened to disrupt oil markets when Iraq said on Monday that it would cut production for one month to show solidarity with the Palestinians.

Ali Rodriguez, secretary-general of the Organisation of Oil Exporting Countries, warned that Iraq's action, coupled with labour trouble that reduced Venezuelan oil exports, could provoke an oil crisis.

The move came as fighting intensified, with Israel continuing to defy US calls for a withdrawal from occupied towns and vowing to push ahead with a military offensive in the West Bank. Iraq's decision to become the first Arab country to say it would use oil as a weapon was outlined in a televised speech by Saddam Hussein, the Iraqi leader.

He said: "The Iraqi leadership declared the complete stoppage of oil exports for a period of 30 days when we will further decide policy or until the Zionist entity's armed forces have unconditionally withdrawn from the Palestinian territories." He said the decision was taken against Israel and the US "and not anyone else".

Mr Rodriguez told a radio station in Caracas: "After the announcement of Iraq to suspend exports and the effect of Venezuela's exports [problems], we could go directly to an oil crisis."

Fred Eckhard, the UN's spokesman, said representatives of Somo, the Iraqi state oil company, told UN officials they had received direct instructions from Baghdad to halt exports.

Crude oil prices have been buffeted by a series of developments in the Middle East this year, but this was the first event to have a direct effect on physical supply since Opec slashed its output quota in January.

In London and New York on Monday, crude oil futures rose sharply. Late in London, May Brent was up $1.06 at $27.05 a barrel and Nymex was 34 cents higher in early afternoon New York trading at $26.55.

The Iraqi decision raised concerns that other countries, particularly Iran would follow as public opinion put governments in the region under pressure to take action against Israel.

Saudi Arabia, the world's largest oil producer, opposes the use of oil for political gains. Riyadh has often said it would make up any shortfall in oil supplies. But it might be reluctant to play that role when anti-US sentiment in the kingdom is running high. Kuwait made clear it would not join the Iraqi decision.

The White House sought to play down the embargo by Iraq, which exports 2m barrels a day of crude oil and is the sixth largest oil supplier to the US. Ari Fleischer, White House spokesman, said some Opec nations had indicated they would not go along with Iraq's announcement.

In the Middle East, Anthony Zinni, the US Middle East envoy, last night met Ariel Sharon, the Israeli prime minister, to deliver a White House message on ending Israel's West Bank offensive.

Mr Sharon told the Knesset on Monday that the offensive would continue until its objective of eliminating Palestinian leader Yassir Arafat's "regime of terror" was complete.


Author: Neftegaz.RU

Source : FT.com